Oct 24, 2011

Car prices have stabilised in the past few weeks after the unveiling of the government’s overage car import substitution plan in early September caused huge fluctuations, car traders said last week.

Additional announce-ments from the government regarding the program and the time required to ship the vehicles from Japan, where most have been purchased, has allowed the market to settle, at least temporarily, brokers said.

“The car market has been calm in October because dealers and brokers were waiting to see how much tax would be charged on the imported cars and how the import process works with the first batch of cars,” said U Khin Win, a car dealer at Hantharwaddy car market in Yangon.

As a result, prices of many types of vehicles have recovered by between 20 and 30 percent after falling by as much as 50pc in the wake of the unveiling of the plan in the second week of September, he said.

“Nissan Super Saloons made in 1986 or 1987 with La, Tha and Ah number plates, which had previously been worth K20 million immediately dropped to K10 million after the announcement. But prices have gone back up to about K30 million in October,” U Khin Win said.

U Win Naing, a sales agent for an import and export firm in Yangon, said used car auction prices offered to Myanmar buyers in Japan rose by up to 150pc for popular models as a result of increased demand.

He said prices for good condition Toyota Hilux Surfs and Mark II sedans had increased by between 100 and 150pc since early September.

“Those models were available for US$3500 in September but are now selling for $10,000 because all the buying agents are looking for Toyotas, which they know will sell easily here,” he added.

However, he tipped further price fluctuations in Yangon when the first batch of cars started arriving or if the government made any further announcements.

U Ye Aung, a sales agent for an import and export company based in Pazundaung township, said the $3500 cap placed on purchase prices under the import substitution plan, coupled with the dramatic increase in auction prices in Japan, meant prospective buyers would be unlikely to be able to buy popular Toyota models in the future.

U Ye Aung said many people who had bought overage cars recently to import a newer vehicle were looking for ways to import vehicles more valuable than $3500.

“But most car dealers in Yangon are waiting to see how the Ministry of Commerce and the Ministry of Finance and Revenue judge the value of the imported cars and what duties are owed,” he said.

Other popular vehicles, such as Mitsubishi Pajeros (1998-2000), are still available in Japan for between $2600-5000, 1995-99 Toyota Hilux Surfs for $5000-10,000 and Toyota Caldinas from 1998 through 2002 for $3000-5000, said U Min Aye, an import sales officer for Dual Trading Company in Botahtaung township, which is also acting as a car auction agency.

Overage car owners who wish to substitute their vehicles are facing a credit crunch because they must pay up to $3500 to purchase the new vehicle, 165pc in tax to the government and transport and processing fees as well, including taxes to the Japanese government.

In addition to the costs, most agencies in Yangon are asking $1200 or K1 million as a service fee to take care of acquiring the import licence certificate, bank transfers, sales contracts, shipping and other paperwork.

Most agencies are asking clients to pay 50pc of the total cost upfront. Several are allowing the cost to be settled when the car arrives but also charge 5pc interest a month.

Car owners are also concerned about the reliability of the import agencies. As a result of this uncertainty, the prices of cars eligible for import substitution have fallen by about 20pc, from an average of about K10 million to about K8 million.

“I have already submitted my Volkswagen to the Ministry of Transport in Yangon and received a substitution certificate but I haven’t applied for an import licence from the Ministry of Commerce in Nay Pyi Taw because I can’t decide which agency to choose,” said Daw Thida Aye.

“But it is not clear how long the certificate is valid for and I am waiting and hoping that car showrooms might open soon,” she said.

Owners of vehicles in running condition with number plates from Nagyi to Pa, which will be the third batch of cars available for import substitution from January to March 2012 are also unsure whether to sell their cars now or hold onto them. Some owners have voiced concerns that if they do not submit the cars for import substitution within the government’s timeframe, they will never be able to do so.

“Before the substitution program was announced, my Toyota Corolla with a Pa number plate used to be worth about K17 million. But afterwards its value dropped by about 50pc to K10 million or less,” said U Tun Linn.

“ I cannot afford to import a newer car, which would cost me at least K10 million. I’m not sure whether I should sell my car now or hold onto it and risk losing money later,” he added.

Meanwhile, Weekly Eleven reported on October 20 that the Ministry of Commerce announced on October 19 that agencies that agree to comply with the ministry’s regulations could open car sales centres for the overage car substitution program in Yangon, Nay Pyi Taw and Mandalay.

The centres would be allowed to sell imported cars according to the import substitution plan’s regulations and price cars for not more than US$5000, trucks for not more than $12,000 and buses for no more than $15,000. However, prospective buyers would also be required to pay the 165pc tax.